How safe are my deposit savings in Bank of Ireland?

[Itronoc]

I have approximately 30,000 euro in Bank of Ireland savings accounts. It was my understanding that the Government guarantees savings up to 100,000 euro, so that even if BoI goes bust, I'll be OK.

I dont really understand, as various things I'm reading are now suggesting that my savings are actually not that safe, as there is a good chance that the State will go bust, not just the banks.

1) Is this true?

2)If this is true, what should I do? Take my money and put it in another bank which is not Irish?

An explanation/answer in plain English would be very welcome!

Thanks

Itronoc

 

[Lightning]

1) There is a very high probability of the state defaulting/restructuring our sovereign debt.

2) Your decision. BoI are junk rated and dependent on the ECB and the state for ongoing support. There are certainly 'safer' options.

What account do you have with BoI?

 

[Paddyman]

Again a very important post. Things seem to get worse on daily basis. No doubt the big savers have their money moved to safety. We small savers don't want to to be at the mercy of a failed state.
And what of Credit Union savers? Their money is deposited in banks and "safe" government bonds.

Can you give us an update of some of the best current "safer" options?

 

[Itronoc]

Thanks Ciaran T,

20,000 is in an 18 month lump sum deposit account and then 7500 is in 3 small regular savings accounts.

You say that "There is a very high probability of the state defaulting / restructuring our sovereign debt" CiaranT, so does that mean that I might be saved in any restructuring?

But even if that's the case - why would I (and millions of others) take that risk? Shouldn't I just take my money out now?

It would seem imprudent of me to leave money in an Irish bank?

Again though, I think I might be missing something

 

[dockingtrade]

THe idea of a depositor losing their money in the euro zone when that depositors lender of last resort is the ecb is ludicrous.

 

[joeryan]

THe idea of a depositor losing their money in the euro zone when that depositors lender of last resort is the ecb is ludicrous.

Does that mean our money is safe in BOI/AIB or not?

 

[bugler]

THe idea of a depositor losing their money in the euro zone when that depositors lender of last resort is the ecb is ludicrous.

Here are more ludicrous ideas, from the vault:

1. Property prices falling.
2. An Irish bank failing.
3. The IMF coming to Ireland.

etc...

 

[Paddyman]

1) There is a very high probability of the state defaulting/restructuring our sovereign debt.

2) Your decision. BoI are junk rated and dependent on the ECB and the state for ongoing support. There are certainly 'safer' options.

What account do you have with BoI?

To get back to the original queston, what are the "safer" options?

 

[UFC]

To get back to the original queston, what are the "safer" options?

The way I am calculating it is where are people likely to transfer their money if things get worse? They have to put their money somewhere.

IMO most people are not sophisticated enough to buy gold or silver or invest in stable companies, so it is likely they will just transfer it into whatever is assumed to be a "safe" bank. IMO this is probably Rabo.

 

[Lightning]

To get back to the original queston, what are the "safer" options?

AAA rated banks like Rabo.
Banks with AAA parents like Northern Rock.
UK Guaranteed banks like Nationwide UK.

 

[Paddyman]

Many Thanks Ciaran!

Just one small query. Is National Irish Bank still a safe option?

 

[Troy McClure]

NIB are safer. Danish bank guarantee.

Ciaran, I love the way we still quote ratings agencies, even though they have consistently got it wrong through all this mess and are completely unregulated. In my mind they are an elephant in the room as to the fundamental problems world economies are experiencing. They are a big part of the problem.

 

[Marc]

http://www.askaboutmoney.com/showthread.php?p=1144730#post1144730p

There are no winners in a run on the banking system you just transfer a banking crisis into a sovereign debt crisis.

The risk is held by all of us in society it isn't possible to gain from closing your bank of Ireland account. The bank will fail it will be nationalised and you will pay for it through taxation.

 

[dockingtrade]

Here are more ludicrous ideas, from the vault:

1. Property prices falling.
2. An Irish bank failing.
3. The IMF coming to Ireland.

etc...

BAnks have failed they are bust , deposits are un touched they are being supported by the euro currency central bank this is nothing to do with bailout money . The ecb is doing its job. Outside of fundamental s just think for a second what would happen if depositors took a hit in the euro zone. The biggest losers would be France and Germany

 

[bryanod]

Of course you could also be faced with the scenario where all Irish Nationals accounts were frozen within the Eurozone and put into Punt Nua if there was any problem so Rabo wouldn't save you from that.

Basically, nobody really knows despite the millions of econmic experts in the country.

 

[Duke of Marmalade]

Of course you could also be faced with the scenario where all Irish Nationals accounts were frozen within the Eurozone and put into Punt Nua if there was any problem so Rabo wouldn't save you from that.

Basically, nobody really knows despite the millions of econmic experts in the country.

I have some sympathy with this viewpoint. In the extremely unlikely Armageddon that is being envisaged I cannot see a situation whereby you escape simply because you moved your deposits to Rabo or indeed to some bank located externally. We are probably talking about some confiscation or wealth tax and no way will people escape simply because they withdrew funds from Irish banks. In any case I believe your 30K is as safe as houses

 

[UFC]

The EU are not going to freeze people's bank accounts. They will use quantitative easing to devalue the currency and inflate away the debt.

However the Irish government could possibly freeze people's bank accounts. This is highly unlikely but it is possible. In that case you want to have your money outside Ireland. As you probably know, you can't transfer money from Rabo -> Abroad. You have to transfer it from Rabo -> Ireland.

 

[SemperFi]

The EU are not going to freeze people's bank accounts. They will use quantitative easing to devalue the currency and inflate away the debt.

UFC Can you explain this in a little more detail? cheers.

 

[UFC]

UFC Can you explain this in a little more detail? cheers.

Look what's happening in the US at the moment. They are using quantitative easing (i.e. printing money) to increase the circulation of money. This has a number of effects, three of the big ones being a) a devaluation of the currency hence a devaluation of all debt and b) increased money supply which means high inflation and lots of money to buy things like stocks and commodities and c) cheap exports.

So the US economy is in big trouble, but because of quantitative easing they are able to print their own money to buy their own debt. Example: the US treasury needs money so they offer some bond at x%. No foreign investors want to buy the bond so the federal reserve prints loads of money and buys it themselves. In effect this mean the US is able to borrow money from itself and can never go bankrupt. However this sort of nonsense makes imports very expensive, dilutes the value of people's savings, and really does put the county at risk of hyperinflation (e.g. if China decides to dump all their dollars because they can see its value is being inflated away, this will cause a huge surge in the dollar supply which will drastically push up prices due to more money competing for the same items). Hyperinflation is what happened in Zimbabwe -- a loaf of bread costing one billion dollars.

The ECB can do something similar. Let's say for example Ireland decides to default on the money the ECB have lent us. The ECB can simply print more money. There is no need to freeze people's bank accounts and take their money because they can print it out of thin air. (You can only do this with 'fiat money'; if we were a prudent continent we would have backed the euro with gold to ensure it is a stable currency (i.e. its supply is limited) and has genuine value).

I'm rambling, but in a nutshell I am trying to say the ECB can print money to get itself out of any problem, so they don't need to freeze out bank accounts and take our money. They can just print more of it. The risk of all this is hyperinflation but a lot of economists don't think it is likely to happen.

Ireland can't do this by the way -- we aren't supposed to print euros -- so in theory our government could freeze our bank accounts.

Note I am not an economist, I just love economics!

 

[Duke of Marmalade]

Of course inflation (or currency depreciation) reduces the real value of debts. This is simply a transfer of resources from the lenders to the borrowers. Governments tend to be borrowers and so might be tempted by a bit of inflation. But when it comes to the ECB what incentive does it have to transfer resources from lenders to borrowers? Why should it transfer wealth from fiscally prudent northern Europeans to profligate PIIGS?